Urban League’s New Fund Aims to Spur Growth of Small Businesses

Written by Zakiya HarrisGreen For All Business Accelerator Program Manager

The National Urban League has empowered generations of civil rights leaders to further justice and improve education and housing. Now it’s about to empower minority-owned businesses to improve the economic opportunities in their communities.

The Urban League has formed a financial subsidiary—a venture capital arm of sorts—to lend to, and coach, small to medium-sized minority-owned businesses that are likely to provide jobs and revenue to inner cities.

The League’s Urban Empowerment Fund will be both a small business loan fund and a community development financial institution.

“We’ve been looking specifically at how underserved local communities could attract more capital and develop stronger and healthier businesses that could create jobs and provide role models,” said Donald Bowen, chief program officer of the Urban League and the newly named president of the Urban Empowerment Fund..

“In many cases people that do community development work tend to parachute into local communities, do a job and leave,” Bowen said. “They come in and complete the transaction, make money off that transaction, but the knowledge transfer, the capacity, and even the money generated in any fee income, generally is taken away and does not stay in the community.”

“We are really going to be an advocate for impact,” he explained, “to generate community wealth,” in urban areas that are distressed. Tired of the redlining that makes it tougher for minority-owned businesses to get bank loans at reasonable interest rates, and tired of those one-time community development deals that don’t generate ongoing business or jobs, the Urban Empowerment Fund wants to invest to grow strategically placed businesses.

While the Fund will consider funding each business that applies, it hopes to focus ultimately on those minority-owned businesses “that can fill strategic roles in supply chains of major corporations and government,” Bowen said, because such businesses are in positions to grow profits and employment, which will in turn spur growth of nearby businesses.

He described them as “Companies that can prosper and grow to scale, grow to a size where they are able to hire significant numbers of people.”

The Urban Empowerment Fund will start with a $5 million fund next year, which consists of $1 million of its own existing capital and $4 million committed by four bank partners: Bank of America, Citi Corp, JPMorgan Chase and Wells Fargo.

It expects to begin operations in the first quarter of next year, after it hires a chief credit officer and others in the executive team and subsequently raises capital. It will offer loans between $50 million and $250 million, which he notes is smaller than what banks tend to want to bank but larger than typical micro-financing.

Bowen said he aims to grow the fund to $50 million in five years.

The Fund will also consider businesses using traditional criteria of investment banking, with an emphasis on a sound business plan.

The Fund’s review of business plans will focus on the management of the firm, the product or service they provide, the market, and how they plan on penetrating that particular market. If they are currently in business, their current financial statement—meaning profit and loss and balance sheet—and prospective financial statement or revenue they expect to achieve from the market will also be evaluated.

But the impact an investment will have on communities of color will also be considered.

“Given we are a subsidiary of the National Urban League, a historic civil rights organization, we will have an advocacy and public policy component of our work,” Bowen said.

The National Urban League has already stepped into pursuing economic justice through business with its Entrepreneurship Centers in ten cities. These centers, in Atlanta, Chicago, Cincinnati, Cleveland, Houston, Kansas City, Jacksonville, Los Angeles, New Orleans and Philadelphia, offer management consulting and training to some 10,000 businesses, according to the League.